Caution required: three common scenarios with big consequences
In these property briefs, we have three situations which seem straightforward, but often aren’t, which can land the unwary in hot water. We take a look at the implications for landlords when tenants sell their business, what those boxes mean on Agreements for Sale and Purchase, and the difference between ‘joint tenants’ and ‘tenants in common.’
Commercial landlords: what happens when tenants sell
If you own a commercial building, at some point you’ll have a tenant who wants to sell their business, quite likely before their lease has expired. It’s commonly forgotten that tenants need to seek consent from their landlord. When your tenant sells, they have to get your consent to assign the lease to the new business owner. You usually have 10 days to approve the lease.
Of course, you may still have the same business operating on your premises, but the people will be different. What assurances do you have that rent will be paid on-time, that the property will cared for to the same standard as your previous tenant? Unfortunately, there’s no real way to know, but you can take steps to find out more about your new tenant.
Make sure you get a credit check on the incoming tenant and any guarantors for rent payments. Ask to see a copy of their financial statements and business plan, and find out if they own any property.
There’s no need to feel obliged, or that you have no choice about consent. You have the right to do due diligence on any new tenant. If you feel unsure about the new tenant, you can refuse consent to the assignment on reasonable grounds. Naturally, talk to us if you have any doubts.
Buying a house? What do the boxes you’ve ticked mean?
The standard Agreement for Sale and Purchase form works perfectly well for adding finance, LIM report and builder’s report conditions to an agreement. All you need to do is tick a few boxes and say you understand you need conditions to protect you while you apply for finance, phone your builder and get a copy of the LIM from your local authority.
But do you really understand the implications of these boxes you ticked? For example, if your builder’s report raises issues, how substantial do they need to be to become ‘objective problems’? If you bring these issues to the vendor, did you know you need to provide them with a copy of the report? Are you aware that you can’t just walk away from the deal if the report uncovers things you don’t like?
Then there’s the issue of finance. Did you know that you have to make a reasonable effort to get a mortgage and that if you don’t, you’ll be in breach of the terms? If you do get finance and don’t like the terms, did you know you could be stuck with it?
Most purchasers don’t realise there are strict obligations in the standard wording of the Agreement for Sale and Purchase. But you don’t need to use a standard agreement. Our property lawyers can draft conditions to an agreement that better suits your needs. The small increase in up front costs could save you from an expensive problem later on.
‘Joint tenants’ and ‘tenants in common’: what’s the difference?
This question needs to be asked when two people buy a home together. However, it often gets overlooked. Here’s why you need to know the difference.
If you’re buying a home with your partner, it’s usually assumed you’re purchasing the property jointly because you’re in a relationship. If this is the case, then it’s appropriate to have a joint tenancy. If one of you dies, the property passes to the survivor.
However, there are situations where you may want to protect your own investment in a property. To stop the property instantly passing to the other owner at your death, you’ll need advice about owning the property as ‘tenants in common.’ This makes a record on the title that you have proportional ownership and that your share of the property is to pass to the beneficiaries of your estate who are named in your will.
In both cases, talk to our property lawyers about which form of ownership is best for your situation.